Correlation Between Stolt Nielsen and Star Bulk

Can any of the company-specific risk be diversified away by investing in both Stolt Nielsen and Star Bulk at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Stolt Nielsen and Star Bulk into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Stolt Nielsen Limited and Star Bulk Carriers, you can compare the effects of market volatilities on Stolt Nielsen and Star Bulk and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Stolt Nielsen with a short position of Star Bulk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stolt Nielsen and Star Bulk.

Diversification Opportunities for Stolt Nielsen and Star Bulk

0.41

Correlation Coefficient

Stolt Nielsen  Star Bulk

Very weak diversification

The 3 months correlation between Stolt and Star is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Stolt Nielsen Limited and Star Bulk Carriers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Bulk Carriers and Stolt Nielsen is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Stolt Nielsen Limited are associated (or correlated) with Star Bulk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Bulk Carriers has no effect on the direction of Stolt Nielsen i.e., Stolt Nielsen and Star Bulk go up and down completely randomly.

Pair Corralation between Stolt Nielsen and Star Bulk

Assuming the 90 days horizon Stolt Nielsen Limited is expected to generate 2.25 times more return on investment than Star Bulk. However, Stolt Nielsen is 2.25 times more volatile than Star Bulk Carriers. It trades about 0.09 of its potential returns per unit of risk. Star Bulk Carriers is currently generating about -0.15 per unit of risk. If you would invest  2,461  in Stolt Nielsen Limited on October 25, 2024 and sell it today you would earn a total of  134.00  from holding Stolt Nielsen Limited or generate 5.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Stolt Nielsen Limited  vs.  Star Bulk Carriers

Stolt Nielsen Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stolt Nielsen Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Star Bulk Carriers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Star Bulk Carriers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Stolt Nielsen and Star Bulk

The main advantage of trading using opposite Stolt Nielsen and Star Bulk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stolt Nielsen position performs unexpectedly, Star Bulk can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Star Bulk will offset losses from the drop in Star Bulk's long position.

The idea behind Stolt Nielsen Limited and Star Bulk Carriers pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.